GCC economies set for soft landing, says report

Gulf Finance House chief economist Dr Ala'a Al Yousuf

The global financial crisis and plunging oil prices has ended a six-year boom in all GCC economies except Qatar, according to an economic report from a leading Bahraini financial institution.

Gulf Finance House’s (GFH) GCC Economics and Strategies Report said GCC macroeconomic figures will be “disappointing” for 2009 with nominal GDP to fall 30% and oil production to post its largest annual decline in more than a decade.

It said oil prices remain the key to GCC governments’ ability to spend their way out of a severe slowdown, but a drop in government expenditure is expected as “cash-strained foreign partners exit projects and access to cheap equity and debt financing remain tight.”

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Out of all the GCC nations, Qatar is tipped to be better positioned to withstand the economic pressures.

“We believe Qatar will outperform other GCC states in terms of structural resilience and growth momentum, mainly due to solid public and private balance sheets, strong banking sector and absence of a real estate crisis,” the report said.

“Doubling of LNG export capacity in 2009, coupled with robust domestic demand, will be key drivers.”

GFH’s chief economist, Dr Ala’a Al Yousuf, said the remaining GCC countries have now firmly joined the last group of countries to be affected by the global financial crisis.

“While the GCC would be able to manage the challenges of lower oil prices, the region cannot stave off the effects of a protracted, global financial turmoil,” Al Yousuf said.

“Nevertheless, in a worse case scenario, the GCC’s substantial public and private wealth will enable it to cope better than many large economies,” he added.